Just because a stock’s trading at a low level, it doesn’t necessarily mean it’s a cheap share. However, the valuation of a company‘s linked to the share price, so a good place for me to start is by looking at stocks that have been recently fallen. Here are two I’ve spotted at 52-week lows I think are becoming undervalued.

Turning warehouses into profit

The first one is Tritax Big Box (LSE:BBOX). The real estate investment trust (REIT) is the UK’s largest investor in logistics warehouses, holding a portfolio in this area worth £6.4bn. Over the past year, the share price has fallen by 12%.

The fall to 52-week lows hasn’t been based on any specific negative news. In fact, the latest half-year results from late summer were very positive. Operating profit jumped 29.6% versus H1 2023, with the contracted annual rent roll increasing 34.7%. Ultimately, if the business can continue to have high occupancy rates that boost the rent roll, profits will keep ticking higher.

Another reason why I like the REIT is due to the income. The stable business model means I’m confident in the firm’s ability to keep paying out reliable dividends. At the moment, the dividend yield’s 5.46%, well above the FTSE 250 average.

One factor I think has caused the move lower recently is that interest rate expectations in the UK have changed. We’re now expecting a slower pace of cuts into next year, meaning that borrowing costs will stay higher for longer. Given that Tritax has to borrow to fund new purchases, this is a risk.

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A recession hedge

Another stock at 52-week lows is B&M European Value Retail (LSE:BME). The stock’s now down 35% over the past year, so clearly there’s a bigger story at play than the REIT.

One of the issues here was the interim results that came out earlier in November. Group statutory profit before tax fell 23.8% versus the same period last year. Even though revenue increased 3.7%, profit margins shrunk as costs increased.

Some also have concerns that the budget retailer won’t do well if the UK economy starts to outperform. Consumers could switch to spending on other retailers instead of hunting for bargains. I disagree with this. Shoppers have been feeling the pinch for years now and I don’t think discount stores will see any fall in demand over the next year.

Further, I think the stock could be used as a potential hedge for a portfolio in case the UK heads into a recession next year. In this scenario, I think the share price would rally as demand surges for cheaper alternatives for products that B&M offers.

Even with the fall in profit, it doesn’t have financial issues, with a low net debt ratio of 1.2x. I feel investors should consider both stocks as potential contenders for inclusion in a diversified portfolio.